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Report: Debt Collectors Use New Strategy to Hose Consumers

Any consumer who has struggled periodically to keep up with their bills is no doubt familiar with the harassment of debt collectors. These efforts range from obnoxious, late-night calls to sometimes scary visits in-person.

However, as federal regulators have cracked down on these strategies, debt collectors have found a new one: Sue, and count on the likelihood no one will fight back.

Debt collection lawsuits in Miami are becoming frighteningly common. Our consumer rights lawyers recognize the worst part is that many people assume a verdict in favor of the collections firm is a foregone conclusion, so they don’t even attempt to mount a defense. In turn, they suffer with liens on their homes, garnished wages, seizure of assets and even frozen bank accounts. These outcomes are often avoidable, even in cases where the debt is undisputed, but it requires the debtor actually show up to court and fight back.

Unfortunately, there is growing evidence that in a great number of these cases, debtors aren’t even served appropriate notice. In other cases, people were sued for various debts they never owed or had paid off. With no one in court to represent them and contest the allegations, defendants usually suffer as a result of being handed a default judgment.

Consumer advocate groups are calling for more oversight and reform, particularly when people clearly aren’t being properly notified of pending litigation against them. Usually, by the time a judgment is issued, debtors are left with few options.

Just in the last decade, the debt collection industry has grown exponentially. For example, last year in New York state some 200,000 debt collection cases were filed against consumers.

These are firms that purchase the rights to uncollected debt from original firms. Typically, they are purchasing these rights for pennies on the dollar. While they might initially employ appropriate debt collection practices, they soon turn to litigation.

The problem is that sometimes in the transfer of those rights, the information transferred is not correct – and there is no outside agency that works to verify veracity. That means there is nothing to stop these companies from filing litigation against a consumer whose debt is technically too old to pursue or was paid off or who might never have owed it in the first place.

There have been some situations in which consumers received notice of the lawsuit, but disregarded it, believing it was junk. And while that may be a good way to describe the contents of the lawsuit, courts are still awarding judgments in favor of these firms when no one is there to represent the consumer’s interests.

A 2010 study conducted by researchers in Maryland found that fewer than 2 out of every 10 borrowers who were served with notice of debt collection litigation even bothered to respond to that summons.

And what most of these folks don’t realize is that even a cursory review of the facts would likely find some grounds on which to dismiss the claim, or at least significantly reduce it. The Federal Trade Commission reported last year that only six percent of all accounts brought by debt collectors in court cases contained the very basic components of credit terms and conditions and account statements. Failure to provide this information is the basis for serious concern over the validity of the alleged debt.

But again, with no one to challenge their position, the claimants win their cases more often than not.

We are here to help make sure your finances don’t suffer the same fate.

If you’re battling foreclosure or credit issues in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

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